METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM,

vs.
COURT OF APPEALS

Casts:

Benny Boy - Narrator

Martin, Andrew and Sir Sartagoda – the ones who did the fraud
Jerwin – NAWASA General Manager
Sitoy – PNB Manager
Rhea – NBI Head

Narrator aka BENNY BOY:

Metropolitan Waterworks and Sewerage System is a government owned and

controlled corporation created under Republic Act No. 6234 as the successor-
in- interest of the defunct NWSA. The Philippine National Bank, on the other
hand, is the depository bank of MWSS and its predecessor-in-interest NWSA.
Among the several accounts of NWSA with PNB is NWSA Account No. 6,
otherwise known as Account No. 381-777 and which is presently allocated No.
010-500281.

During the months of March, April and May 1969, twenty-three (23) checks, a
total of P 320,636.26 were prepared, processed, issued and released by NWSA,
all of which were paid and cleared by PNB and debited by PNB against NWSA
Account No. 6.

During the same months of March, April and May 1969, twenty-three (23)
checks bearing the same numbers as the NWSA checks were likewise paid and
cleared by PNB and debited against NWSA Account No. 6. This time the total
amount is P3,457,903.00.

The authorized signature for said Account No. 6 were those of MWSS treasurer
Jose Sanchez, its auditor Pedro Aguilar, and its acting General Manager Victor
L. Recio.

SCENE 1: (The Plan)

(Three men convene one afternoon to plan on forging checks of NWSA)

Andrew: Brad Martin, I’ve heard you are now working at NWASA.
Martin: Yes. I am assigned in the Treasury Department.

Andrew: Actually, I need your help. I have signed contract for an overseas job.
Because of that, I have to pay placement fee for me to be able to work abroad.
Unfortunately, I don’t have enough money in hand. I am wondering if I can
borrow sufficient money for the placement fee from you.

Sir Sartagoda: Brad Martin, I need money, too to pay my son’s tuition fee. He
will be graduating from college in March.

Martin: I am sorry, Brad. I don’t have enough money as well. But I have an idea
on how we can get a huge amount of money.

Sir Sartagoda: How can we possibly do that?

Martin: I am assigned in the Treasury Department. The checks of NWASA are

laying open to unauthorized persons. The checks writer can easily be found on
top of the table. I observe that they don’t provide any control regarding the paper
used in the printing of checks and other security measures needed to safeguard
the checks.

Sir Sartagoda: So what’s the plan?

Martin: I am thinking of forging their checks and subsequently depositing it to

our fictitious accounts.

SCENE 2: (The Execution)

This is the scene in which the fraud is being done.

SCENE 3: ( Deposit of the forged checks)

(The three men are at the bank to deposit the their respective checks

In this scene, the cashier receives the check without conducting proper
verification of the genuineness of the signature)

NARRATOR as Benny Boy: The 23 forged checks were deposited by the payees
Raul Dizon, Arturo Sison and Antonio Mendoza in their respective current
accounts with the Philippine Commercial and Industrial Bank (PCIB) and
Philippine Bank of Commerce (PBC). Raul Dizon, Arturo Sison and Antonio
Mendoza are all fictitious persons.
SCENE 4: ( The Discovery )

Location: General Manager Victor L. Recio aka Jerwin’s office :)

(He receives a call from Mr. Emiliano Zaporteza, the one who is assigned to
receive bank statements from PNB)

Phone rings. Jerwin answers it.

Jerwin: Hello

Zaporteza: Good afternoon Sir Recio, I just want to verify something with you.
This is with regard to the recent withdrawals from NWSA Account No. 6.

***No need an actor as Zaporteza. Pwede ra ni xa I subtitle ang iya line? 

Jerwin: Go tell me more about it.

Zaporteza: I am looking at the bank statement right now. There were 23 checks
that were paid and cleared by PNB against Acct No. 6. The total amount is
P3,457,903.00. I am just wondering Sir if you are aware of these transactions.

Jerwin (Frustrated): No!!!! I never issued checks for such huge amount of
money. The only 23 checks that I released during March, April and May was a
total sum of P 320,636.26. This is ridiculous! I will have this investigated and
then go to the bank myself to report this matter.

SCENE 5 (The Confrontation)

Location: PNB

(Jerwin goes to the bank (PNB) to demand the restoration of on to its Account
No. 6, of the total sum of P3,457,903.00)

Jerwin to PNB Manager:

Good afternoon, sir. I am here to make a complaint with respect to the

P3,457,903.00 that was credited against my account. I never authorized those
withdrawals. I coordinated with the NBI and their investigation showed that
those twenty- three (23) checks were forged. The payees of the checks in
questions are all fictitous persons. So I am now requesting the immediate
restoration to our Account No. 6, of the total sum of P3,457,903.00.

PNB MANAGER aka SITOY: Thank you for bringing this matter to us. However
sir we are unable to debit it back to your account. The checks in question were
regular on its face in all respects, including the genuineness of the signatures
of authorized NWSA signing officers and there was nothing on its face that could
have aroused any suspicion as to its genuineness.

Jerwin: This can’t be happening. The prime duty of the bank is to ascertain the
genuineness of the signature of your depositor on the check being encashed. It
is expected to use reasonable business prudence in accepting and cashing a
check presented to it. If it pays a forged check, it must be considered as making
the payment out of its own funds.

PNB Manager aka Sitoy: I am sorry. There’s nothing we can do about this.

Jerwin: If that’s the case, I will sue you!

NARRATOR aka Benny Boy:

In view of the refusal of PNB to credit back to Account No. 6 the said total sum
of P3,457,903.00 MWSS filed the instant complaint before the Court of First
Instance of Manila the Court of First Instance of Manila. The Court the rendered
judgment in favor of the MWSS. CA reversed the decision of the Court of First
Instance of Manila and rendered judgment in favor of the respondent Philippine
National Bank. The appellate court applied Section 24 of the Negotiable
Instruments Law.

SCENE 6 (NBI’s Findings)

Rhea (Head of NBI): There were no indications found that the twenty-three (23)
questioned checks were indeed signed by persons other than the authorized
MWSS signatories. So we can not declare or prove that the signatures appearing
on the questioned checks are forgeries. There are differences, though, in the
type face, checkwriting, and printing characteristics appearing in the standard
or submitted models and the questioned typewritings.
I had a conversation with Mr. Ongtengco from the Treasury Department at the
NAWASA as part of our investigation. He told me that his office is quite open to
any person known to him or his staff members and that the check writer is
merely on top of his table. Relying on his statement, I have all the reasons to
believe that this fraudulent act was an inside job or one pulled with inside
connivance at NAWASA. The serial numbers of these checks in question
conform with the numbers in current use of NAWASA, aside from the fact that
these fraudulent checks were found to be of the same kind and design as that
of NAWASA's own checks. While knowledge as to such facts may be obtained
through the possession of a NAWASA check of current issue, an outsider
without information from the inside can not possibly pinpoint which of
NAWASA's various accounts has sufficient balance to cover all these fraudulent
checks. None of these checks was dishonored for insufficiency of funds.

Interviewer (No actor needed): Based on your investigation, do you believe that
there’s negligence on the part of NAWASA?

Rhea: I believe so. At the time the twenty-three (23) checks were prepared,
negotiated, and encashed, the petitioner was using its own personalized checks,
instead of the official PNB Commercial blank checks. We observed also that
there is some laxity and loose control in the printing of NAWASA cheeks. We
gathered from MESINA ENTERPRISES, the printing firm that undertook the
printing of the check vouchers of NAWASA that NAWASA had no representative
at the printing press during the process of the printing. It failed to provide the
needed security measures which constitutes gross negligence.

Another factor which facilitated the fraudulent encashment of the twenty-three

(23) checks in question was the failure of NAWASA to reconcile the bank
statements with its own records. The bank statements are to be delivered to a
certain Mr. Emiliano Zaporteza. He was unreasonably delayed in taking prompt
deliveries of the said bank statements and credit and debit memos. As a
consequence, he failed reconcile the bank statements with NAWASA’s records.
This negligence was, therefore, the proximate cause of the failure to discover
the bogus check.

NARRATOR aka Benny Boy:

The Supreme Court ruled that even if the twenty-three (23) checks in question
are considered forgeries, considering the petitioner's gross negligence, it is
barred from setting up the defense of forgery under Section 23 of the Negotiable
Instruments Law.
It cannot fault PNB for not having detected the fraudulent encashment of the
checks because the printing of NAWASA’s personalized checks was not done
under the supervision and control of the Bank. There is no evidence indicating
that because of this private printing NAWASA furnished the Bank with samples
of checks or took other precautionary measures with the PNB to safeguard its
interests.